Small Cap Value Report (Thu 3 Sept 2020) - RBG, HEAD, MPAC

3rd Sep '20 by Paul Scott

84 comments 10349 reads

Good morning, it's Paul here with the SCVR for Thursday.

Estimated timings - I need a lunch break now (at 12:57), but will get a new section on MPAC up by 5pm. Update at 17:05 - sorry it took so long, but today's report is now finished.

Results webinars - I've watched 2 webinars/conf calls today, which eats up a lot of time, but is very useful in expanding my understanding of businesses that are already in my "looks interesting" tray;

Mpac (LON:MPAC) is 11am, courtesy of Equity Development, signup link here.

Headlam (LON:HEAD) (I hold) is a conf call, not a webinar, sorry I got that wrong earlier. I'll feed back anything interesting to you.

Companies being covered in today's report are;

Revolution Bars (LON:RBG) - (I hold) - trading update on re-opening of its bars

Headlam (LON:HEAD) - (I hold) - Interim results, 6m to 30 June 2020

Mpac (LON:MPAC) - Half year results

That might be all there's time for today, since it will involve me looking at 2 webinars, in addition to going through the results RNSs. But as always, do flag up in the comments below, if there's something really good that I might have missed.

If you're new here, just FYI, I try to focus my time on shares that seem to have good potential upside, not on poorer quality, or over-priced things. After all, my main activity is investing my own money, with report writing here really being a sideline to recycle research that I would be doing normally anyway.

US markets - euphoria

I see the relentless rally in US markets is continuing, with the most remarkable V-shaped rebound in markets that I've ever seen. It seems obvious to me that the markets across the pond seem to be in something of a speculative frenzy. Valuations generally don't make sense to me, and I'm braced for a big correction at some point. When significant parts of the market begin to completely disregard valuation, and instead valuations of growth companies are based on their story alone, then you know you're close to the end of the bull run. It's 1999 all over again, in my view. Whilst acknowledging that the top tech stocks are remarkable businesses, it's the next tier down that…

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kendal

3rd Sep '20

Mpac - late lunch Paul?

MichaelFBS

Thank you for this and very interesting.

I was in Milan on 23rd February and having read the BBC web site at 4 in the morning I got the heebie-jeebies and wanted to leave immediately on Monday morning (I didn't I had a fab breakfast at Coya!).

But as I garnered more information I changed my views. Media and government seem to be set in a late March mindset. It is all very odd and perplexing.

Rusty2

Some big falls today, so looking a bit better value now.

Bluesky Ventura

Hi Andrew

You'll find my most important posts gets red downs. I can only imagine the truth hurts.

Kind regards,

BSV

This comment is under review

GrahamF

rmillaree

Not sure why he (retired nurse teacher Dr John Campbell) would have any greater insight into this than someone who is an expert in vaccines, which he is not. As far as I can see, his forte is just reviewing the news in a way that is clear to the layman. Because he speaks clearly and in a manner that is easy to follow people seem to think he has some special insight. I cannot see why that should be the case.

TheArb

There is a large notice on the inside of Number 10's door warning those departing that Downing Street is a public highway and warning that documents that are taken out are not made visible to photographers.

Nick Ray

For those of you currently on line now .... a "big correction" is going on in US tech stocks right now.

Bit of a surprise there. A quick scan of my "canary"portfolios at lunchtime suggested everything was ticking along quietly. Had another quick look after the markets closed and I was surprised to see them all at -2% or so.

Paul Scott

Sorry, I've been absolutely swamped today, and following US markets big moves, etc.

I got there in the end, MPAC section is now up. It's very difficult to switch off everything else going on, to focus on report writing sometimes I just get overloaded.

ACounsell

Must be a combination of Paul’s analysis and today’s newsletter from John Authers at Bloomberg! Alternatively it may have been the news reporting of Apple’s market capitalisation exceeding the combined value of the FTSE100! I struggle to understand the logic of the following. The relative out performance of Nasdaq and S&P 500 , both up YTD (until today perhaps ), versus the FTSE 100 & FTSE 250 (both down 20%+ YTD) is attributed to the the absence of billion/trillion dollar technology stocks in the UK indices which are dominated by Covid-19 damaged banks, insurers/investment managers, oil companies, property and retailers. . Yet on a day when the NASDAQ is down 5% the UK markets follow it down and will probably slump further tomorrow. It seems we have much bigger problems than a lack of high flying technology stocks.

Talk to anyone who's actually run multi-site retail or hospitality, and they'll all tell you the same thing. Lease liabilities are only a problem if a site is trading at a loss, because you can't exit from it. Profitable sites, you actually want a longer lease (hence the liabilities are irrelevant). IFRS 16 totally ignores this, the commercial reality. And it's screwed up cashflow statements too, and operating profit is now useless, plus we have to cross out entries on the balance sheet. It's a diabolical mess, and should be scrapped!

Apparently a lot of Robinhood traders are using options, and doing their conkers that way.

ken mitchell

Brilliant update on MPAC Paul and well worth waiting for. Thanks.

Gromley

Gromley - I think that the lesson is we simply mustn't have another lockdown of the young and healthy because this does not make sense from any point of view. I worry about schools and universities in particular. It is so unfair to trash children's education because of something which is unlikely to make them (or most of their teachers) dangerously ill.
But I'm straying from the investment theme unless I think of a way to make this relevant!

I think the link back to the investment theme, is that whilst we have an opinion on what is the 'right' course of action, we also have to be aware of what could happen. FWIW I don't think a major lockdown on the young should or will be on the cards, but I would not rule out some additional restrictions particularly on the pub sector if events warrant it.

Anyway on the subject of education and how precarious 'normal' is these days, I have a bit of 'an anecdotal' to offer.

My youngest son had been shielding since March (owing to having been born with three holes in his heart). He was back at school for the first time yesterday (and is thoroughly enjoying it), today we got a call to say that one of his class mates has suspected symptoms and is getting tested. We are now awaiting to see whether his bubble is about to be deflated for 2 weeks! I had planned to be away next week, so that is on hold too. A lesson not to take anything for granted.

Tommy H

If you give them a couple more hours they might make it down that far...

Or not as the case may be...

Dave_17

Brilliant write up on MPAC. Perfect balance of information and education. Not everything on the plate but pointers and directions. No need to have all the answers, let's work together to form the details.

john652

US Correction.

We might have a correction going on in NASDAQ but the 'buy the dip mentality' , with the Fed clearly having your back, is ingrained generally in the market, and... the Nasdaq stocks are amazing businesses. I'd exclude Tesla, but that's now down 20%, even Apple down 8% today.

But, this correction still leave Nasdaq at 11,400 higher than only two weeks ago!

But, if we get more falls to 10,000, id be buying, at 9000 i'd be buying a lot of WT CLOUD COMPUTING UCITS ETF (LON:WCLD) Polar Capital Technology Trust (LON:PCT) so how far down this corrects is to be seen, as these businesses are not going away and a very strong argument that if you bought the nasdaq at 10k & held for 5 or 10 years, or even 1 year, you would beat Warrens S&P buy a mile.

bryans1311

BlueSky Ventura has form on here. I’m not going into details, but some of us have very long memories.

Yes that is exactly what I used to do and because I couldn’t sleep at night I negotiated to change all my leases to turnover based leases.

I couldn’t tell from year to year which was going to be profitable and which wasn’t but whether a site was making money or not did not absolve me of my obligation to pay rent.

I will have to study “And it's screwed up cashflow statements too, and operating profit is now useless, plus we have to cross out entries on the balance sheet.” because I don’t understand.

Anyway we will have to agree to disagree but IFRS 16 makes sense to me. :-)

Regards

Michael.

4th Sep '20

Really Bryans1311,

you should go into detail.

Small Cap Value Report (Thu 3 Sept 2020) - RBG, HEAD, MPAC

US markets - euphoria

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Paul Scott

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